Sexy Cases

Journalist, practitioners and scholars often accuse agencies of putting resources on “sexy” cases.

This would be particularly true in matters where agencies can prioritize cases and select enforcement targets: e.g., in unilateral conduct cases and to a lesser extent in merger cases (the argument has less traction in cartel and State aid cases).

With this background, there’s a good proxy to determine whether agencies focus on sexy cases: brands rankings.

And this recent ranking seems to confirm agencies interest for sexy cases: the top 5 brands are Apple, Google, Amazon, Microsoft and Samsung. All those companies are currently wrestling with DG COMP.

So much for the facts.

Public choice theory has an appealing explainer for public authorities’ focus on sexy cases: like standard businessmen, agency officials are profit maximisers. Yet, given that they cannot maximize revenue, they strive to make good on other variables, such as press recognition, reputation, etc.

In the week-end, I had some time to think on whether it is good for agencies to focus on sexy cases.

The answer to this is unclear. On the one hand, sexy cases are likely to improve the taxpayer’s knowledge of competition policy, and disseminate the “culture of competition” accross society. In brief, sexy cases are good in terms of competition advocacy.

On the other hand, sexy cases nurture disinterest for competition policy. Let me explain. Sexy cases generate the perception that competition policy is public policy for the rich and wealthy. On complainants’ side, if you don’t have a complaint against a Google or a Microsoft, you feel you are unlikely ever to attract agency interest. This, in turn, has a cost for society. Cases which are potentially serious, yet unsexy, will not be reported to the agency (a type II error). Similarly, on infringers’ side, firms with little public exposure know that there are quasi-immune from prosecution if the enforcement system is focused on sexy cases. Thus, they have little incentives to comply with competition law (another type II error).

With this background, I still fail to figure out which of those two effects – knowledge v disinterest – dominates the other.

Yet, I intuitively believe it is good administrative policy for an agency like DG COMP to also run ‘small‘ abuse cases like Tomra or the recent ARAcase.

I conclude with a thought, which just sprung to mind whilst writing this post: may agencies be sometimes tempted to hide sexy cases? I mean look: the CDS and Libor investigations or the Gazprom case make remarkably little noise in the news, despite their considerable interest for society at large.

I have just been asked to make the most unsexy analysis: if a price set by a direct sales company in its catalogue and applied by its distributors (natural persons) amounts to an illegal RPM. It’s hard to beat that in terms of unsexiness.
I think that it’s not the “unsexiness” that creates the disinterest effect. the mere fact that you don’t have a rule saying “there is no RPM below a [100 / 1000] euro per sale” makes you wonder if the RPM rules in general are reasonable or not. and the 15 min in legal fees (you can of course do much more if you are an unreasonable / profit maximising lawyer…) are a waste…
and the absence of focus on unsexy cases creates uncertainty, which cannot be good as a matter of policy. when a sexy company proposed “agency” and “MFN” clauses, a judge says “it helps producers to start and implement a cartel”, which may come as a shock for those not involved in unsexy cases; for the others, it confirms that the competition rules are not made to confer certainty.
but of course, these are not “cartels”, “abuse of dominance”, or other “sexy” cases (as I can see, “sexy can be a company or the infringement). My example is a minor unsexy vertical arrangement, which does not constitute a priority for enforcement, except when the antitrust agencies catch a very clear RPM and refuses to consider any positive effects (because, of course, it is a major infringement that was never cleared on the basis of an individual exemption…)

I would think that that metric of sexiness doesn’t work. Having a high-value brand is an important source of market power, meaning that companies with high-value brands being the target of competition enforcement is exactly what you would expect, all else equal.

I disagree. Whilst a strong brand may give some market power, it remains a poor and blunt proxy. Many firms with low-value brands enjoy market power. This is for instance the case of dominant firms that are not active in consumer goods markets (input sellers). There are many EU examples of this: Tomra, IMS health, etc. Plus many firms with high value brands have no significant market power (Nokia, Blackberry, etc.).